Another takeover offer for WCB

About the author:

Author name:

By Belinda Moore

Job title:

Senior Analyst

Date posted:

25 October 2013, 8:08 AM

Sectors Covered:

Agriculture, Food & Beverage, Travel and Chemicals

As we expected, Saputo has increased its takeover offer for WCB. Saputo is now offering A$8.00 cash per share. In addition, shareholders will receive 20c of franking credits if they get over 50.1% acceptance or 56c of franking credits if acceptances reach 90%. Saputo was previously offering WCB shareholders A$7.00 per share.

Saputo's new offer is greater than Murray Goulburn's offer of A$7.50 per share and Bega Cheese's consideration which is currently worth A$6.74 per share.

Saputo's offer is conditional on it receiving greater than 50% of WCB and FIRB approval.

The WCB Board has said that it supports Saputo's offer in the absence of a higher offer.

The higher offer highlights the strategic value of WCB's assets. WCB provides Saputo with geographic diversification, increased milk supply, a strong position in the Australian dairy market and given WCB's significant export position, it will be able to increase its presence in the high growth Asia Pacific dairy market.

It will be interesting to see if Murray Goulburn and/or Bega Cheese come out with higher offers.

If Bega is unsuccessful in acquiring WCB it will end up with a cash windfall. Based on Saputo's new offer, Bega would receive A$82m (or 54cps) in cash. In addition, if Saputo receives an acceptance level of over 90%, it will receive 56cps of franking credits. Bega can use these funds to pay down debt, fund further growth opportunities and/or return it to shareholders. 

Once WCB is taken over, we wouldn't be surprised to see corporate interest in Bega emerge.